rural marketing – issues opportunities & challenges

Rural Marketing Rural Marketing –– Issues Opportunities & Issues Opportunities & ChallengesChallenges

Indian RuralIndian Rural

The Macro Scenario

Rural Market Has Finally ArrivedRural Market Has Finally Arrived

• 742 million people• Rural is bigger than urban

• FMCG's 53% • Durables 59%

• Estimated annual size of the rural market• FMCG Rs 65,000 Crore• Durables Rs 5,000 Crore• Agri-inputs (incl. tractors) Rs 45,000 Crore• 2 / 4 wheelers Rs 8,000 Crore• Total Rs 1,23,000 Crore

Source: Francis Kanoi, 2002


• Some impressive facts about the Rural market• In 2001-02, LIC sold 55 % of its policies in rural India.

• 50% of BSNL mobile connections in small towns/villages.

• 482 crorepatis in rural Haryana, only 137 in Bangalore, similar number in Kolkata or Hyderabad.

• 55.6 million Kisan Credit Cards (KCC) issued (against 60 million credit-plus-debit cards in urban) resulting in tremendous liquidity.


• Some impressive facts about the Rural market• Of 20 million Rediffmail signups, 60 % are from small

towns. 50% transactions from these towns on Rediff online shopping site.

• No of HHs saving in formal financial instruments (banks, mutual funds, shares etc) same in rural and urban at 6.2 million in 2002-03

• Electricity consumption

Sector 1980 2000Agriculture 17.6% 29.2%

Industry 58.0% 34.8%

Rural Income DispersionRural Income Dispersion

Consumer Class Annual Income 1995-96 2006-07

Very Rich Above Rs 215,000

Rs 45,001- 215,000

Rs 22,001- 45,000

Aspirants Rs 16,001 - 22,000 26.0 44.6

Destitutes Rs 16,000 & Below 61.4 20.2

Total 100.0 100.0

5.6

Consuming Class

1.6

2.7 5.8

Climbers 22.48.3

NCAER Projections Based on 7.2% GDP Growth

Rural Housing PatternRural Housing Pattern

House Type 1981 1991 2001

Pucca 22

37

41

41

Semi- Pucca

31

36 36

Kuccha 33 23

(percentage)

Source: Census of India

Distribution of VillagesDistribution of Villages

Source: Census 2001

Population No of villages % of total villagesLess than 200 96,855 15.7

200-500 1,36,454 21.4

501-1000 1,56,737 24.6

5001-1000 20,363 3.2

1001-2000 1,40,751 22.0

2001-5000 87,206 13.7

Total no of villages 6,38,365 100.0

17% of villages account for 50%

of rural population &

60% rural wealth

Hardly any shops in these 2.3 lac villages

Distribution of TownsDistribution of Towns

61

34

2327 26

72

25

1411

30

911

0

10

20

30

40

50

60

70

80

Top 8 Other 1 Mn+ 0.5-1 Mn 0.2-0.5 Mn 0.1-0.2 Mn < 0.1 MnTown With Pop

Mill

ions

0

5

10

15

20

25

30

35Towns

Per

cent

age

Mn%

Source: NRS 2005

Distribution Of Towns ContinuedDistribution Of Towns Continued……

Town Class Population No. Of Towns % of Total

Class I 1 Lac above 423* 8.2

Class II 50,000 – 99,999 498 9.6

Class III 20,000 – 49,999 1386 26.9

Class IV 10,000 – 19, 999 1560 30.2

Class V 5000 – 9,999 1057 20.5

Class VI Less than 5000 237 4.6

Total 5161 100.0

90 % of durables purchased by

rural people are from these 1900

towns

* 10 Lac +: 27, 5 – 10 Lac: 42, 1 – 5 Lac: 354 Source: Census 2001

Issues In Rural DistributionIssues In Rural Distribution

Large number of small markets

Poor road connectivity Large number of intermediaries leading

to higher costs

Low density of shops per village and high

variation in their concentration

Inadequate banking and credit facilities for retailers, poor viability

of outletsPoor storage system, leading to inadequate stocking of products

Highly credit-driven market and low

investment capacity of retailers

Dispersed population and trade

Issues In Distribution

Issues In Distribution

InsightsInsights

The Rural Consumer

Rural Consumer InsightsRural Consumer Insights

• Rural India buys• FMCG's more often (mostly weekly).• Buys small packs, low unit price more important

than economy.• Distribution and pricing are the mantras to success

in rural India.

Even expensive brands like Close up, Marie biscuits, Clinic shampoo are doing well because of deep distribution


• In rural India, brands rarely fight with each other

• They just have to be present at the right place

Average Number of Brands Per RetailerCategory11

Rural Urban

Toothbrush 3 7

Toothpaste 3 6

Biscuits 3 9

Hair Oil 3 7

Source: ORG 2002


Details Rural Urban

Average monthly sale / outlet Rs 3,000 Rs 12,500

No. of product categories stocked per outlet 19 27

No. of brands / outlet 42 92

Average Stock Keeping Units / outlet

62 154

Source: ORG 2002


• Many brands are building strong rural base without much advertising support.• Chik shampoo, the second largest shampoo brand.• Ghadi detergent, fourth largest brand.

• Brand recognition not through name but.• Color (Lal Dant Manjan, Red battery)• Numeric (555 detergent bar)• Visual (Ghari detergent, Katchua Chaap)

• Buy value for money not cheap products.

Rural MythsRural Myths

Perception vs. Reality

Myth 1 : Rural a Homogeneous MassMyth 1 : Rural a Homogeneous Mass

• The reality• Heterogeneous population• 16 languages• State wise variations in rural demographics• Literacy (Kerala 90%, Bihar 44%)• Population below poverty line (Orissa 48%, Punjab

6%) Big Land Lords

Traders & Small Farmers

Marginal Farmers

Laborer’s & Artisans Rur

al P

yram

id

Source: Planning Commission, GOI

Myth 2 : Disposable Income is LowMyth 2 : Disposable Income is Low

• The Reality• Number of middle class HHs (annual income Rs

45,000- 2,15,000)

• Per Capita Annual Income

Rural 15.6 Million

Urban 16.4 Million

Rural Rs 9,481 (Punjab- Rs 16.5 K, Haryana- Rs 14.8 K)

Urban Rs 19,407

Source: NCAER, 2002

Myth 3 : Individual Decide About PurchasesMyth 3 : Individual Decide About Purchases

• The Reality• Decision making process is often collective• Purchase process- influencer, decider, buyer, one

who pays can all be different. • Marketers must address brand message at several

levels• Rural youth brings brand knowledge to House Hold

IndiaIndia’’s Rurals Rural

What’s Changing

Infrastructure Improving RapidlyInfrastructure Improving Rapidly

• In 50 years only 40% villages connected by road, in next 10 years another 30%.

• > 90 % villages electrified, though only 44% rural homes have electric connections.


• Rural telephone density has gone up by 148% in the last 5 years, every 500+ pop is connected by STD.

• 18.8 million individual phone connections.

• Levels of literacy are up.

Rural Tele-density (phones per 100)

Division 2000 2005 % increase

Rural 0.7 1.74 148%

Urban 8.2 26.2 220%

All 2.9 9.08 213%

Source: TRAI, 2005 & Census 2001


• 70% of R1,R2, R3 can be reached through mass media.

Source: IRS 2001 & 2005

14

21

41

26

53

70

SatelliteTV

Radio Press Cinema TV All Media

SEC wise Rural HHR1 - 4%R2 - 11% R3 - 39%R4 - 46%

Rural MarketRural Market

Opportunities & Challenges

Marketing OpportunitiesMarketing Opportunities

• Low penetration in rural

FMCG’s Urban Rural Total

Toothpaste 749 376 486

Soft Drinks 370 122 198

Mosquito Repellent 541 152 267

Coffee 232 79 125

Skin Cream 315 178 220

Health Beverage 188 47 88

Per 1000 HH

Source: IRS 2005


• Low penetration among lower pop strata villages and SEC R3/R4

Source: IRS 2005

Penetration of Durables and FMCG (% of HH)

Product Category Pop Strata (Villages) SEC

5K+ 1K-5K <1K R1/R2 R3/R4

Radio 14.1 14.5 14.4 24.4 12.7

CTV 18.5 9.7 7.1 30.1 7.8

Telephone 12.7 5.3 3.7 23.6 3.6

Toilet Soap 92.4 88.2 87.2 96.0 87.7

Shampoo 35.3 33.1 24.6 47.5 29.2

Toothpaste 49.5 36.0 29.1 69.1 32.1

Soft Drinks 16.0 12.3 7.8 22.7 10.4

Mosquito Repellents 22.4 14.8 8.4 31.2 12.4


• Rapidly growing product categories and largest rural brands in rural markets

Rural Growth of FMCG and Durables (% of HH)

Product Category 2000 2005

11.1

5.3

4.2

2.3

Shampoo 13.3 31.9 213.7

Packaged Biscuits 39.1 54.2 38.6

13.7

12.2

Growth (%)

CTV 3.7 217.6

Tractor 1.8 27.8

Motorcycle 3.0 76.7

Refrigerator 3.2 31.3

Packaged Edible Oil 8.7 57.5

Soft Drinks 9.8 24.5

Base: All Rural Households Source: IRS,2005

Largest Rural Brands

-13.1W. PowderNirma

21.5

5.6

6.4

8.2

Growth (%)

W. PowderGhari

BiscuitsParle-G

Toilet SoapLux

Toilet SoapLifebuoy Active

CategoryBrand

Figures are year-on-year growth for MAT July 2004 by ValueSource: AC Nielsen Retail Store Audit


• SEC wise rural households• R1 - 4%• R2 - 11% • R3 - 39%• R4 - 46%

• Rich HHs FMCGs Annual ConsumptionUrban RuralRs 13,000 Rs 9,400

• Rural consumption volumes (R1+R2+R3)• Toothpaste 88%• Toothpowder 79%• Shampoo 88%

So this half of the population consumes over 75% of FMCG

volumes

ChallengesChallenges

In future

ChallengeChallenge

• Reaching the product to remote rural locations and entering more rural homes (penetration)

• Increasing rural incomes (market growth)

ChallengesChallenges

• Making effective use of the large available infrastructure • Post offices 1,38,000• PCOs 2,00,000• Haats (periodic markets) 42,000• Melas (exhibitions) 25,000• Mandis (agri markets) 7,000• Public distribution shops 3,80,000• Bank branches 32,000

New WaveNew Wave

• Proliferation of large format rural retail stores• DSCL Haryali stores• M & M Shubh Labh stores• TATA/Rallis Kisan Kendras• Escorts rural stores• Warna bazaar, Maharashtra (annual sale Rs 50 crore)• ITC Choupal Sagar

Corporates Need To DoCorporates Need To Do

• Long term commitment to rural. Create a dedicated rural vertical

• Grow size of rural pie: Public-Private partnerships• Hire professionals from rural management institutes –

IRMA, IIRM, XIM etc• Create rural specific products and communication• Explore new Distribution models – mobile traders, NYKS

volunteers etc• Commission MR studies to profile Rural Consumers• Organize rural sensitization training for managers• Industry Associations should glamorize Rural Marketing.

Quote Quote -- UnquoteUnquote

• The future lies with those companies who see the poor as their customers.

C K Prahalad

• To get rich, sell to the poor.Pradeep Kashyap

ThatThat’’s Alls All

Thanks

rural marketing – issues opportunities & challenges

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